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Sears Canada slashes forecast

Given the continued tricky retail environment, Sears Canada has cut its earnings forecast for the current third quarter, projecting earnings per share will fall by 55 percent to 70 percent beneath year-ago levels, to 10 cents or 15 cents per share from 34 cents in 2000.

"The retailing environment remains highly competitive. High levels of promotional activity, particularly in the department store sector, has created tremendous pressure on gross margins," said Mark Cohen, chairman and ceo.

Making the outlook even bleaker, the retailer would be posting a loss in the period if it weren't for a one-time gain of 20 cents per share pegged to the sale of receivables.

"Previously announced expense reductions, largely focused in the second half of the year, remain in effect," Cohen added. "Inventory levels are on plan and seasonal content, both trailing summer and fall/winter, is where we want it to be."

However, Cohen noted, "Our outlook for the balance of the year remains highly guarded. Inventory commitments for the balance of 2001 and the first half of 2002 have been reduced to reflect this view."

For the four weeks of August, Cohen said, total sales increased by 6.5 percent, to $454.7 million, and merchandise sales increased by 8.6 percent. Same-store sales advanced by 1.2 percent. But "sales were weaker in bed and bath, children's wear and automotive," he noted.

"From a selling channel perspective, sales were very strong in our off-mall formats, particularly Sears Furniture and Appliance stores and Dealer stores. Sales were not as strong in our full-line stores in the catalog channel. We continue to experience strong sales growth with the Internet. Revenues in our home improvement and repair services business were also very strong."

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